Excitement over a Chinese stimulus “bazooka” is starting to wane, say Wataru Suzuki and Stella Yifan Xie for Nikkei Asia. Beijing has unveiled a series of stimulus measures designed to reinvigorate the world’s second biggest economy, sending the local CSI 300 index soaring by more than a fifth. Markets have been pinning their hopes on a rumoured ¥1 trillion-¥3 trillion (£107 billion-£322 billion) in “fresh fiscal spending”, but details are lacking.
Finance minister Lan Fo’an merely said there is “relatively large room” for new state borrowing. Fo'an plans to use it to help cash-strapped local governments and to stabilise the property market, says Keith Bradsher in The New York Times. Investors want numbers, but for that, they must wait until later this month, when the standing committee of the national legislature is expected to “sign off” on new debt issuance.
How are investors reacting to the Bazooka stimulus?
Markets are hoping for a bazooka stimulus to rival China’s massive response to the 2008 global financial crisis, says Mohamed El-Erian on Bloomberg. They are likely to be “disappointed”. Not for the first time, foreign money managers are “grossly” oversimplifying the Chinese economy. Officials have always shown a preference for “limited stimulus”. They are well aware that a huge fiscal bazooka would only exacerbate the “serious imbalances” and debt that caused this slowdown in the first place. China wants an “insurance policy” against a serious economic crunch, not a bazooka that will fire up another unsustainable boom.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The stock market rally is part of a strategy designed to raise economic confidence, says Ambrose Evans-Pritchard in The Telegraph. These state-sanctioned “boomlets” usually run for two months before regulators step in to cool things down. That said, with global interest rates falling, the current rally may have a little more “staying power”. Stocks “could have a pop for a while, but the risk is what we saw coming out of Covid”, says Bill Bishop of the China Sinocism newsletter. “There was quite a rally for a couple of months but then people realised that the economic policies hadn’t changed.” On 11 times forward earnings, Chinese shares are temptingly undervalued, says Chan Ka Sing for Breakingviews.
The equivalent rating for Indian shares is 20. But the Shanghai market trades heavily on sentiment – much of this rally “has been fuelled by fast money betting” on the latest government announcements. “Chinese stocks have become more of a trade than a long-term investment.” The market’s long-term record is disappointing, agrees Buttonwood in The Economist. Over the past 15 years, Chinese GDP has “quadrupled” in nominal terms, yet the CSI 300 is up “less than a quarter” over the same period. Should long-term “buy and hold” investors pile in? “The answer is clearly still ‘no’.”
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
'Lockdown wills’ at increased risk of legal challengePressures caused by the pandemic led some people to rush their wills. Now, lawyers are saying problems are surfacing that could make them invalid
-
Gilt yields fall to lowest level since 2024The cost of government borrowing is falling. A new bond issuing strategy could be helping bring gilt yields down.
-
Hiring new staff for your business? Help is availableHiring more employees is a costly business, but help is available from the government, says David Prosser
-
'Expect more policy U-turns from Keir Starmer'Opinion Keir Starmer’s government quickly changes its mind as soon as it runs into any opposition. It isn't hard to work out where the next U-turns will come from
-
Why does Donald Trump want Venezuela's oil?The US has seized control of Venezuelan oil. Why and to what end?
-
Britain heads for disaster – what can be done to fix our economy?Opinion The answers to Britain's woes are simple, but no one’s listening, says Max King
-
Vietnamese stocks are charging ahead – what to buyVietnam has been upgraded from a frontier to an emerging market. It remains a promising pick, says David Prosser
-
How Javier Milei led an economic revolution in ArgentinaFollowing several setbacks, Argentine president Javier Milei's pro-market reforms have been widely endorsed in a national poll. Britain will need the same
-
Market predictions for 2026: Will Dubai introduce an income tax?Opinion My 2026 predictions, from a supermarket merger to Dubai introducing an income tax and Britain’s journey back to the 1970s
-
The steady rise of stablecoinsInnovations in cryptocurrency have created stablecoins, a new form of money. Trump is an enthusiastic supporter, but its benefits are not yet clear
